The primary purpose of this blog (Prithviraj Kothari - MD, RSBL | Bullion market blog) is to educate the masses of the current happenings in the Bullion world.
This blog contains my opinion, which is not to be construed as investment advices.
Information provided in these blogs is intended solely for informative purposes and is obtained from sources believed to be reliable

Saturday, 17 January 2015

A few weeks earlier, we saw a lot of noise in the market…but this time it seems that someone left the loudspeakers on!

Well, oil and SNB played the game here.Precious metals showed great volatility- all thanks to the fluctuating oil prices.

Crude oil was highly volatile after a report from Paris based energy agency IEA depicted a likely reduction in Non-OPEC output for 2015 by 350,000 BPD.

Moreover, gold and silver prices soared in Euro terms after the SNB moves and now many market players are beginning to wonder if a loss of confidence after the Swiss fiasco has started a run on gold?

Bullion traders said sentiment turned better after gold rallied to the highest since September in global markets as the dollar weakened after Switzerland decoupled its currency to the euro and lowered the deposit rate.

Gold had closed at 1276.50 following a brief intraday break above 1280, its highest level since September 2014. We look to the September 2nd open of 1286 as the next important level of Resistance, followed by 1300 and 1320. Momentum indicators are increasingly bullish.

Gold regained its safe-haven mantle following a shocking and unforeseen decision by the Swiss Central Bank (SNB) to scrap its cap on the franc’s exchange rate against the euro.

After the SNB- Swiss National Bank dropped the bombshell on the markets Thursday morning, the prices of the precious metals had gone in one direction… UP. In just two days, the price of gold was up $40 and silver $1.10.

Post this action, gold rose more than 2 percent to a 4 month high in Thursday. This was a result of the move by Switzerland to abandon its three-year cap on the franc sent global shares and bond yields into turmoil.

Following the Swiss National Bank’s unprecedented move to abandon the
franc’s peg to the euro, the country’s currency had appreciated sharply
against the U.S. dollar. The surge in the Swiss franc…means it is now
the most overvalued of all the developed market (DM) currencies in
terms of the deviation of the real effective exchange rate from its
10-year average

The SNB has been under growing pressure to revisit the peg as speculation grows that the European Central Bank could introduce outright money-printing as early as next week, which could see the euro zone flooded with liquidity. It looks as is the SNB decision has finally destroyed the notion of $800 gold ever again.

Furthermore, a Labor Department report released on Thursday showed that Jobless claims climbed by 19,000 to 316,000 in the week ended Jan. 10, the most since early September, from a revised 297,000 in the prior period.

Adding to it, the gold price climbed on Friday after a lackluster US inflation report had participants readjusting their timetable for the next Federal Reserve rate increase.

In data, the US consumer price index fell 0.4 percent last month, the biggest drop since December 2008, after sliding 0.3 percent in November. It also undershot the -0.3 percent forecast.

This goes directly against the Federals Reserve’s mandate to achieve inflation of around two percent as the reports imply a deflationary trend. Which further means that the fed may probably delay its rate increase as it would want to know that inflation is on track to hit this level before acting?Additionally, deciding not to reduce stimulus in 2015 would also be consistent with a goal-oriented approach to the employment mandate.Additionally, Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 717.15 tons on Friday from 707.59 tons from its previous close on Thursday.Fall in equities and worries over Euro area political and debt issues might continue to help Bullion complex as a whole and mainly the yellow metal. Next week we could see further volatility as the ECB are set to meet and it is widely expected they will announced a broad-based government bond purchases.We stay with our moderate positive bias in Gold and advice buying on small dips.- Previous blog - "Lot of Things To Smile About For Precious Metals"http://riddisiddhibullionsltd.blogspot.in/2015/01/lots-ofthings-to-smile-about-for.html

Monday, 15 December 2014

Overall, it was a decent week for gold. It was a swing for gold that swayed between the bullish and bearish trends. Since Nov. 7, the metal has climbed 9 percent from a four-year low.

Gold was up 2.5 percent this week after Tuesday's big rally. Falling stock markets have prompted some investors to buy the metal as an alternative asset, while a drop in the greenback made dollar-priced bullion cheaper for holders of other currencies. The spot gold price was last at $1,224.00/1,224.90 per ounce, down $1.80 on Thursday’s close. But overall it was a positive week for gold.

Some key influential factors for gold this week have been:

SPDR: An improvement in sentiment was seen in the holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, edged higher to 725.75 tons on Friday, a nearly 5 tonnes rise last week. Since mid November its around 717 to 721 tonne range in terms of holdings.

US DATA: Gold soon touch a low on Friday to print a price of $1214 when the US consumer confidence spiked to a new post-recession high in December. The Thomson-Reuters/University of Michigan preliminary index of consumer sentiment leapt to 93.8 then the expected value of 89.5, the highest level in the past 8 years. This confidence could be attributed to the decline in fuel prices.CHINA: China's National Bureau of Statistics report showed that industrial production to have advanced 7.2 percent in November from last year. This was the weakest growth in three months and slower than the 7.7 percent increase seen in October and 7.5 percent growth forecast by economists, which will only fuel speculation that further stimulus measures from Beijing might be needed.

EURO ZONE: data from Eurostat showed Eurozone industrial output to have edged up by a less than expected 0.1 percent October, after a revised 0.5 percent increase in the preceding month. Moreover, Fitch ratings cut its ratings on France to AA from AA+ on Friday, saying the country's revised deficit reduction target was not enough to avoid a downgrade.

DOLLAR: Gold extended gains as the dollar headed for the biggest drop in a month against a basket of 10 currencies. The dollar index, which tracks the U.S. unit against six major currencies, traded at 88.32 on Friday, down from its previous close of 88.55 late Thursday in North American trade.

OIL PRICES: Weakness in energy prices have weighed on gold sentiment lately, dulling the metal's appeal as a hedge against oil-led inflation.

Overall, Safe-haven demand and short covering have been behind gold's recovery from 4-1/2-year lows hit last month.

Silver does remain locked in the range of $17.00 - $17.35 with a break either side of this, would give some more idea on which side is the prices headed. Whereas the short term support for Gold is at USD $1215 and the resistance around $1235

Markets believe that the statement released by the FOMC all this while about “considerable time” shall be removed from their minutes now. Which means that the rate hike will happen soon which will further affect gold prices.

What needs to be watched closely this week?

15th - the U.S. November industrial production

16th - the December flash manufacturing PMI for China, the Eurozone, and the U.S. November housing starts

17th - the Bank of England MPC Minutes, the FOMC rate decision, the Fed’s press conference and the U.S. November inflation

18th - Germany’s December IFO business climate

19th - the Chicago Fed’s speech

As we approach 2015 while bidding farewell to 2014, we see three major events that will be affecting gold prices largely in the coming year: